In recent times there have been several lawsuits, accused of monopolistic practices, directed at several of the large international technology companies, specifically against those known under the acronym GAFA (Google, Amazon, Facebook and Apple).
Though some of us are just beginning to be aware of these practices, it might interest you to know that monopoly dates as far back as 1890.
The precedent for antitrust laws is the Sherman Antitrust Act, which came into force in the United States in 1890 had one purpose, and that was to protect market competition to benefit consumers by ensuring that there are strong incentives in business. This in turn enabled companies to operate efficiently, keep prices low and improve quality.
One of the cases in which this legislation was first applied was in the case of the Standard Oil Company. John D. Rockefeller founded this company, along with other partners, in 1870. In 1882 they created the Standard Oil Trust, which managed to control a large number of companies, dominating nearly 90% of oil production in their country.
It was the time of Cornelius Vanderbilt (Railways) and J.P. Morgan (Banking and Steel) who became famous for their market monopolization strategies. In general, the strategy used was to create conglomerates of companies in the same sector and lower prices until the competitors ended up in bankruptcy, then to buy these companies and join them in their group.
In application of the Sherman Act, the US Supreme Court ordered in 1911 the forced division of Standard Oil into 34 companies. Today they are daughters of those empire companies with Exxon Mobil and Chevron, after many mergers and acquisitions.
Another case was in 1982 the decision to chop AT&T (American Telephone & Telegraph) as it began to create a monopoly in the American communication industry.
More recent, and already within technology companies, was the lawsuit filed in 2001 against Microsoft for its attempt to monopolize the Internet browser market by taking advantage of its dominant position in personal computer operating systems. In this case, however, the company reached an out-of-court agreement with the US Department of Justice that established some counterparts but did not require Microsoft to change its code or prevent it from linking other software to Windows in the future.
At present, companies such as Google, Amazon, Facebook and Apple have increased their economic value dramatically and this process has accelerated with the pandemic. This enormous financial power means that they can afford to buy from any possible competitor. If they refuse, they sometimes use discriminatory practices or develop a similar product and use all their machinery to drive them off the market. They are accused of being eroding the entrepreneurial spirit of start-ups.
They are also beginning to enter other sectors such as automotive, banking or energy, which worries regulators. Margarita Delgado, deputy governor of the Bank of Spain, calls for barriers to the entry of large technology companies in the financial sector due to the “systemic risks” that it entails due to the opacity of their systems with possible implications on financial stability, competition or consumer protection.
Yves Mersch (member of the executive committee of the European Central Bank) has done the same about the launch by Facebook of its cryptocurrency (Libra), indicating that, unlike central banks, “conglomerates of corporate entities are only accountable to its shareholders and members ”.
What specifically are each of these technologies accused of?
Google (a subsidiary of Alphabet), the company founded in 1998 and headquartered in Mountain View (Silicon Valley, California), controls 80% of internet searches in the US. online search markets, advertising based on that information and prioritizing its set of applications and services over those of other companies. They are judge and party: they control advertising and the channels used for it, such as operating systems (Android) and browsers. This means that other companies do not have a real opportunity to compete.
Facebook has already been sanctioned on several occasions for issues related to privacy or the case of Cambridge Analytica. In a recent lawsuit by the prosecutors of 48 of the 50 North American states, it was requested that this company get rid of Instagram and WhatsApp, two companies that it bought in recent years with which it has consolidated its dominance of the market.
To the company, Apple is accused of monopolistic practices since the AppStore is the only authorized way to install applications on their devices, for which they get important commissions.
In the case of Amazon, a report from the US Congress attributes them imposing leonine conditions and abusive clauses in their contracts to suppliers, but, above all, using the information available through its website to identify the products of greater success and replicate them with their brands, giving them greater visibility in front of users.
One of the greatest difficulties in fighting this type of practice has been that, unlike classic monopolies, in which conglomerates used their advantageous position to raise prices, thus harming consumers, now most of the services provided by the technological ones they are free.
It is also true that these companies provide valuable services that are also highly appreciated by users, having favoured the rapid development of digital technologies.
The authorities have begun to become aware of the problems that these new types of monopolistic practices can pose for free competition and innovation, and this has been done in the form of millionaire demands and new laws. This is the case in the US where, in recent months, there have been antitrust lawsuits directed at these companies. It is worth highlighting the devastating report from Congress last October entitled “Research on Competition in Digital Markets.”
Last December, the European Commission presented the Digital Services Law (DSA) and the Digital Markets Law (DMA) with which it is intended to respond to these challenges. With these rules, they want to change the commercial practices of these companies in Europe under a fine of between 6% and 10% of their global turnover. The possibility of forcing the sale or segregation of assets is also contemplated if the recommendations are repeatedly breached (as a measure of last resort).
The Digital Market Law allows preventive measures to be activated (for example, it requires prior authorization to purchase other companies to avoid acquiring small rivals with the sole objective of closing them). This is to avoid the development of dominant anti-competitive companies.
The Digital Services Law requires the rapid removal of illegal content from their websites (incitement to hatred, copyright infringement, advertisements for counterfeit products or disinformation campaigns). They are also required to be more transparent in their advertising policies.
These rules must receive the approval of the European Parliament and the Council of the EU, so their implementation will take a few months. As they are written, they constitute one of the strictest regulations on this subject in the world.
What all analysts seem to agree on is that the current antitrust regulations are not enough and are not adapted to the reality of new technologies.
Some like Enrique Dans believe that, although there are monopolistic practices to be corrected, these companies should not be demonized either, since their success is since they have investigated more than others and have generated a large amount of value highly appreciated by all citizens.
Others like Alex Stapp, in the MIT Technology Review, criticize the aforementioned US Congress report and point out that the possible chopping of these companies would lead to bankruptcy.
Another theme in the background of all this controversy is the struggle of the great nations to be dominant in the technological field.
logical and, in particular, the US intention not to lose this battle against China. The partition of these large companies would leave them less able to compete against large conglomerates in China, where they will presumably have less squeamishness about antitrust and consumer rights.
There will be a very fine thread with the legislation and lawsuits. It is not so much about preventing a company from achieving a high market share, but that that company that has been successful does not impede its competitors by employing abusive practices. Business success and innovation must be encouraged while protecting consumer rights and enabling competition.